German automaker Volkswagen has confirmed receiving a notice for allegedly paying less tax on imported components for Audi, VW and Skoda vehicles. According to Reuters, the car major had allegedly evaded $1.4 billion in taxes. 

“Škoda Auto Volkswagen India Pvt Ltd (SAVIP), a part of a Global Group, is a responsible organisation, fully complying with all global and local laws and regulations. We are analysing the notice and extending our full cooperation to the authorities,” SAVIP said in a statement.

According to Reuters, in a notice dated September 30, Volkswagen is said to have imported entire cars in unassembled condition that is subject to import tax of 30-35 per cent in the country under completely knocked-down units. The notice states that the company evaded the levies by ‘’mis-declaring and misclassifying imports” as “individual parts” with a 5-15 per cent duty. 

The report added that the imports were made by Volkswagen India unit, Škoda Auto Volkswagen India, for its models including Skoda Superb, Kodiaq, Audi A4, Q5 and Tiguan SUV. 

“This logistical arrangement is an artificial arrangement... operating structure is nothing but a ploy to clear the goods without the payment of the applicable duty,” said the 95-page notice by the Office of the Commissioner of Customs in Maharashtra that was seen by Reuters. 

The company’s shares fell up to 2.13 per cent on the Frankfurt stock exchange after the Reuters story. 

Internal software

The report mentioned that the Indian notice, based on a review of the company’s internal software, said Volkswagen India regularly placed bulk orders for cars through an internal software that connected it to suppliers in the Czech Republic, Mexico, Germany and other nations.

After the order was placed, the software broke it down into “main components/parts”, roughly 700-1,500 for each vehicle depending on the model. The car parts were packed abroad in different containers within a span of three to seven consecutive days under multiple invoices, and then reached the Indian port roughly at the same time, alleged Indian authorities.

“This appears to have been done to pay lesser duties applicable on these individual parts,” the notice said.

Volkswagen told investigators it was using such a route for “efficiency of operations”, but the argument was dismissed. “Logistics is a very small and rather least significant step of the whole process... (Skoda-Volkswagen India) is not a logistics company,” the notice said.

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